SVA Thesis Week 2: Digging Deeper
Topic of This Weeks Post
The goal of last week’s research was to answer the question “how” millennials are investing. This week, I looked into “why” millennials should be investing.
The Headwinds Oh The Headwinds
The self-proposed prompt, “why” should millennials be investing, led me to a fascinating economic study by Brookings titled The wealth of generations, with special attention to Millennials. The report’s purpose is to investigate patterns and determinants of Millennial household wealth accumulation. The crux of this paper is illustrated beautifully in this graph:
The paper goes on to answer, “why?” Millennials have accumulated such little wealth by eloquently laying out the advantages and disadvantages millennials face in accumulating wealth during their life cycle.
Its findings, to put it bluntly, are disconcerting. Millennials have been dealt a horrible hand:
- We entered, and are now re-entering the workforce an economic downturn, which depresses long-term earnings.
- Since the 1980’s organizations have moved away from defined benefit plans to defined contribution plans, which shifts the burden and investment risk from the employer to the employee
- The likely remedy to the government’s long-term debt problem — increasing taxes, social security, and medicare changes — will hit Millenials during their prime earning years.
To make matters worse, Millenials behaviors will only amplify the effect of the disadvantages listed — We’re going to live longer, we get settled later and embrace the gig economy.
As a 28-year-old Millenial, I began to ponder what personal action I can take to hinder the effect of these discouraging trends? The critical thinking exercise below summarizes my answer: LEARN MORE, SAVE EARLIER, SAVE MORE, INVEST SMARTER.
That’s quite the charter, I know. But by distilling the wide-reaching problem to its core, opportunities did emerge in the following sectors:
- How might we integrate financial literacy and investment practices into the American education system so that students are more inclined to save when entering the workforce?
- How might we increase gig workers’ awareness of retirement investment vehicles and automate mechanisms similar to corporate contribution plans so that gig economy workers are more financially stable in retirement?
